Comparison between Bill Discounting and Factoring. Bill Discounting 1. Individual Transaction 2.

Each bill has to be individually accepted by the drawee which takes time. 3. Stamp duty is charged on certain usance bills together with bank charges. It proves very expensive. Factoring 1. Whole turnover basis. This also gives the client the liberty to draw desired finance only. 2. A one time notification is taken from the customer at the commencement of the facility. 3. No stamp duty is charged on the invoices. No charges other than the usual finance and service charge. 4. More paperwork is involved. 5. Grace period for payment is usually 3 days. 6. Original documents like MTR, RR, and Bill of Lading are to be submitted. 7. Charges are normally up front. 7. No upfront charges. Finance charges are levied on only the amount of money withdrawn. Comparison between Cash Credit and Factoring. Cash Credit Factoring 1. Margin retained on receivables are usually 40- 1. Margin usually retained is 10 %. 50 %. 2. The drawing power on the basis of stock are raised between them. 3. The client has to submit various statements like QIS, I, II & III stock statements etc. to the bank. 4. No collection services performed for the clients. 5. Once a book debt exceeds its usance period, it 6. No such bifurcation. The factoring account is removed from the eligible list 6. Higher limits are bifurcated into CC and DL components. 7. Interest linked to PLR. operates like a CC account 7. Finance charge linked to our cost of funds, which is competitive to that of banks. submissions of stock 2. Prepayments against invoices are made as and when they are factored. It is like cash 4. No such paperwork is involved. 5. Grace periods are far more generous. 6. Only copies of such documents are necessary.

statements is computed once a month. If invoices sales. statements, no money can be drawn against 3. No statements are to be given. On the contrary Factors furnish various reports to both the client and the customer. 4. One of the functions of the factor is debt collection 5. The Factor allows grace up to 30 days.